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Individual Flexible Employment Contract

Things employers need to know

Both employees and employers have the right to request flexible terms of employment. These flexible terms have the effect of varying the terms of the Award which would otherwise apply.

Only certain terms of an employee's Award can be altered. These are:-

  • Working hours and arrangements for when work can be performed;
  • Overtime rates of pay;
  • Penalty rates of pay;
  • Allowances; and
  • Leave loading.
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If you want to change the terms of an employment agreement under a modern award then you can with this flexible agreement.

The overriding consideration for any change, is that the employee is "better off" overall.

This ensures that minimum rights and entitlements (such as pay rates) are not stripped away.

There is no need to lodge the completed IFA with the Fair Work Ombudsman or any other body.

However, the employer bears the onus of ensuring that the legal requirements of the Individual Flexibility Agreement are met: most importantly, that the employee is overall, better off under the Agreement and the employee has genuinely consented to the Individual Flexibility Agreement.

 

Example: David is a chef. Invariably, this means that David is paid various overtime rates and penalty rates for hours worked at nights, on weekends and public holidays etc. This is a bookkeeping nightmare, so his employer requests David be paid a standard flat rate per hour which has been calculated to take into account penalties, overtime rates and leave loading. Under this arrangement, David is better off overall as he is paid a higher amount than he would have been entitled to under the Award. This arrangement benefits his employer also, as he bookkeeping obligations are made significantly simpler.

The legal requirements

An Individual Flexibility Agreement must:-

  • only deal with the matters allowed to be varied as set out above;
  • have the genuine consent of the employee;
  • be in writing;
  • be signed by all parties;
  • a fully signed copy must be given to the employee;
  • a fully signed copy must be retained by the employer for their records;
  • must overall benefit the employee and not undermine any minimum entitlements.

It is also important to note that a person cannot be forced to enter an Individual Flexibility Agreement.

The purpose of the agreement

The purpose is to meet the genuine needs of the employee or employer.

It achieves this by varying the working conditions of an employee that are set out in the Award. This gives an employee (or an employer) a greater degree of workplace flexibility without undermining minimum rights or entitlements.

Advantages and disadvantages

Practically speaking, the strict terms set out in an Award may not be in the genuine best interest of an employer or employee. An IFA has the advantage of allowing employees and employers the flexibility to deviate from these strict Award terms.

Flexible work terms can mean a more positive work life balance for employees, and assist employees to accommodate other responsibilities, such as parenting or further education in a way which benefits both the employer and employee. This can have a direct impact on work satisfaction and lead to longer retention of valuable staff.

Allowing flexible terms can also directly benefit employers as seen in the example given above.

Things to be careful of:

As stated earlier, the onus of ensuring the Agreement is legally compliant and that the employee has genuinely consented, is on the employer.

Therefore full records and notes should be kept of discussions and related matters.

Things to consider are:-

  • that the term of the Award being varied is one of the terms that are permitted to be changed (refer above);
  • the financial implications under the IFA - how does the employee compare financially under the proposed IFA;
  • the personal implications under the IFA. Does the IFA meet a genuine need of the employee> For example, a change in work hours from 9-5pm to 7-3pm may allow an employee to genuinely meet their parenting responsibilities and result in a greater balance of work and personal life;
  • whether the employee is better off overall and has genuinely consented to the IFA;
  • that the employee does not feel threatened or forced to sign an IFA, for example, as a pre-condition to employment;
  • whether an employer has genuinely considered an employee's request for flexible terms.

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How is it different to other employment agreements?

Other employment agreements include:-

Full time Employment Agreement;
Part time Employment Agreement;
Fixed term Employment Agreement;
Casual Employment Agreement.

These Employment Agreements comply with all of the terms and conditions of the relevant Award (depending on the classification of the employee as either full time, part time, fixed term or casual).

Not what you are after? In some instances, rather than an employment relationship being created, it is actually that of a contractor.

Contractor Agreement - where you are hiring a contractor;
Consulting Agreement - where you (as contractor) are providing your services to another.

These are not employment agreements, but are used for independent contractors or consultants engaged on a contractor basis.